Nicholas Financial Adds Review Process Amid Rising Losses

Nicholas Financial Inc. has set up a new centralized department to review approved applications from its dealer partners, in order to lower losses in its new static pools, the company announced last week in its fourth quarter earnings for the three months ended March 31.

Contracts funded after March 31 have gone through the new department, which verifies stipulations embedded in application approvals, to prevent funding contracts with inaccurate job information, invalid income poofs, or other false information, the earnings release stated.

The company’s net-charge-off rate has increased to 11.7% in the quarter, from 8% during the same period last year, according to filings with the Securities and Exchange Commission.

In addition, the company has changed its underwriting guidelines to incorporate more alternative data. Nicholas Financial had a third-party provider of alternative data run a retroactive study on the contracts already in the lender’s portfolio, and the results “have assisted us in identifying areas where our underwriting guidelines did not price the risk appropriately,” the release stated.  

Nicholas Financial purchased $42.6 million in auto contracts for the three months ending March 31, down from $45.1 million during the same period last year. Gross outstandings for its indirect loans came in at $498 million, up from $482 million the year prior.

Indirect loan delinquencies 30 to more than 90 days past due totaled $50 million, which is nearly double the $26.9 million it recorded as delinquent in its portfolio during the same period last year. Total delinquencies accounted for 10% of its indirect portfolio, up from 5.5% the year prior.

Direct auto loans outstanding declined to $10.6 million, from $10.9 million at the same time a year prior. Delinquencies for its direct loans grew to 3.89% of the portfolio, up from 2.19% the year prior. However, direct loans account for 2% of the company’s total receivable portfolio, the Nicholas Financial notes in earnings.

The lender’s weighted average loan term also came down to 56 months, from 57 months during 2016.

  Like This Post

As Assistant Editor at Auto Finance News, William specializes in covering compliance, operations, and subprime issues. As a Brooklyn implant by way of Ohio, he's happy to discuss the triumphs and pitfalls of Cleveland sports as well as the latest music trends. Former bylines include Candy & Snack Today, Inverse, and The Tennessean.

  • twitter

5 thoughts on “Nicholas Financial Adds Review Process Amid Rising Losses

  1. […] gross portfolio yield” since 2016. Therefore, starting in January 2017, it started to create a centralized funding department to review approved applications prior to funding the contract to the […]

  2. […] the quarter ended June 30, due to “intense competition” and recent changes to the company’s underwriting guidelines, said President and Chief Executive Ralph […]

  3. […] the quarter ended June 30, due to “intense competition” and recent changes to the company’s underwriting guidelines, said President and Chief Executive Ralph […]

  4. […] the same time the year prior. Nicholas chalked up the 41% drop in originations to a change in underwriting guidelines — including the use of alternative data — that were implemented to improve the quality […]